Chapter 1. The political economy of biodiversity policy reform: Lessons learned

This chapter draws out the main themes related to the political economy of biodiversity policy reform, derived from the analysis of the case studies in this report. It summarises the lessons learned from the case studies and provides a number of insights on overcoming obstacles to effective biodiversity policy reform.

  

1.1. The need for more ambitious biodiversity policy reform

The need for more widespread and ambitious policy instruments for biodiversity conservation and sustainable use, including the reform of incentives that are harmful to biodiversity, is widely acknowledged. Progress, however, has not been as rapid and effective as needed and global biodiversity trends continue to decline (Butchart et al., 2010). The OECD Environmental Outlook to 2050 projects continued declines under a business-as-usual scenario (OECD, 2012). Loss of biodiversity and ecosystems results in adverse and costly impacts on human health, well-being and economic growth. At the international level, Parties to the Convention on Biological Diversity (CBD) have committed to achieving the 2011-20 Aichi Biodiversity Targets, many of which are also echoed in the more recent Sustainable Development Goals. As the 4th Global Biodiversity Outlook emphasises,1 more concerted policy efforts are needed to attain these goals (CBD, 2014).

Such calls for action are not, by any means, new.2 However, Aichi Biodiversity Target 3, introduced under the Strategic Plan for Biodiversity under the CBD in 2010, contains specific language on the need to reform harmful incentives and apply positive incentives.3 This has helped to renew the political impetus for action and, in 2012, led to a call to consider modalities and milestones for its operationalisation. As countries strive to implement more ambitious and cost-effective policies to enhance the conservation and sustainable use of biodiversity, additional insights are needed as to why some biodiversity related policy reforms have made progress, while others have not.

Insights on the barriers to biodiversity related reform and how they can be overcome can be drawn from examining the political economy of reform – i.e. how decisions are made, in whose interests and how reform is promoted or obstructed and why (OECD, 2011a). Decision text of CBD COP 12 highlights the need for this type of work by inviting Parties to submit information on practical experiences in the implementation of biodiversity related positive incentives and lessons learned in applying options for overcoming obstacles encountered in implementing policies for addressing harmful incentives (Decision XII/L.32, para 23).

While there is a growing body of literature on the political economy of environmental policy in general (e.g. IMF, 2013; Elkins and Salmons, 2010; Sutinen, 2008; World Bank, 2008; OECD, 2006; Felder and Schleiniger, 2002), much less attention has been devoted to biodiversity related policy reforms. Similarly, while there is literature on the political economy of agricultural reform and fisheries reform (e.g., OECD, 2011b; OECD 2011c; Swinnen, 2010; De Gorter and Swinnen, 2002), both sectors that are relevant for biodiversity, these studies do not necessarily focus on the biodiversity aspects of reform. This report aims to address this gap by drawing lessons learned from several case studies on biodiversity related policy reforms.

Some of the salient issues that arise in the political economy of environmental policy include competitiveness issues, distributional implications, vested interests, and political acceptability. These issues are also relevant for the four biodiversity relevant policy reforms examined in this report. The case studies examined are: the French tax on pesticides; the reform of agricultural support in Switzerland; European Union (EU) payments to Mauritania and Guinea-Bissau to finance marine protected areas via conservation trust funds as part of Fisheries Partnership Agreements; and individually transferable quotas (ITQs) and the resource rent tax for fisheries in Iceland.

1.2. Insights on overcoming obstacles to effective biodiversity policy reform

The case studies provide a number of insights on overcoming obstacles to effective biodiversity related reforms. While the policy and institutional settings, actors and motives driving reforms combine in unique ways in each context, learning from the experience of past and on-going reforms can help to illuminate wider lessons that can increase the prospect of success of biodiversity related reforms in other countries. This section draws out the main themes that have emerged across the case studies and the lessons learned.

Stand ready to seize opportunities to advance biodiversity related reforms: from crisis to public concern

Each of the case studies reveals a distinct pattern of reform drivers, which illustrates the diversity of opportunities to advance biodiversity related reforms. The case studies point to the need to be ready to act quickly when presented with windows of opportunity that may be outside the influence of domestic policy-makers and unrelated to environmental concerns. For example, Iceland provides a clear example of a common theme in the political economy of reform: the crisis as catalyst. The major reform of Icelandic fishery policy was driven by an urgent need to prevent the imminent collapse of an economically important industry. While biodiversity was not an explicit aim of the reform, safeguarding biodiversity was a positive by‐product of the reform, which put the fisheries sector on a more sustainable footing.

In Switzerland, several factors came together to provide an auspicious environment for the reform of agricultural support. The composition of the Parliament in 2013 was particularly conducive to approving the reform that had been in preparation over the preceding years. The Parliamentary elections in 2011 saw the Green Liberal Party successfully ride the wave of anti-nuclear sentiment in the aftermath of the environmental disaster at Japan’s Fukushima plant in March of that year (The Guardian, 2011). The current Parliament is more conservative, with greater representation of one of the political parties that had opposed the reform. It is questionable whether the reform of the direct payments system to agriculture to better target public goods, including biodiversity benefits, would have been approved given the political composition of the current Parliament. Further, the reform was developed under the leadership of the then Director of the Federal Office of Agriculture (FOAG) who is credited with being an important influence on driving reform.

For France, growing public concern about the potential risks of pesticide use to human health and the environment has become an increasingly important reform driver, opening opportunities for stronger policy action. While the influence of public pressure is more difficult to trace in earlier stages of the reform, it is clear is that public opinion, as expressed through market choices (via growing demand for organic products and willingness to pay a premium for such products) is increasingly prominent. Heightened media attention, campaigns by NGOs, and swelling public pressure have given momentum to further action on specific types of pesticides. A notable example is the French Parliament’s ratification in June 2016 of a ban on neonicotinoids (insecticides with harmful impacts on bee populations) starting in 2018. Strong public pressure and concerted engagement from the Minister of Ecology helped to push for policy action on this issue.

Build alliances between economic and environmental interests

Several of the case studies illustrate how economic and environmental interests can be aligned to build support for biodiversity related reform. In the cases of Iceland and Switzerland, biodiversity concerns were not an explicit objective of reforms or only a secondary factor. Building alliances between economic and environmental interests can advance reforms beneficial for biodiversity in instances where a more narrow focus on only “green” issues might fail. This can include forming coalitions, either explicitly or behind-the-scenes, with other interest groups who may share the same desired outcomes, though their motivations may not at all be driven by concerns for biodiversity or the environment more broadly. Making a clear link showing how greater provision of ecosystem services can generate economic benefits is also a useful strategy, which was important in the case of Mauritania and Guinea-Bissau.

In Switzerland, arguably, the main impetus for the change in agricultural policy was support for market-oriented reforms to encourage free trade and bring the direct payments system more closely in alignment with World Trade Organisation’s (WTO) “Green Box” criteria.4 Building a coalition among market-oriented interests promoting trade liberalisation and environmental interests was particularly crucial for advancing the reform. Concerns for biodiversity and ecosystems were important as well, but a secondary factor. Active lobbying by environmental NGOs using both economic and environmental arguments helped to win support in Parliament.

In the case of Mauritania and Guinea-Bissau, concerted lobbying efforts by environmental NGOs to clearly link the economic benefits to fisheries of well-functioning ecosystem services helped to gain financing for conservation trust funds for marine protected areas (MPAs). A well-established and credible “broker”, the environmental NGO the International Foundation of the Banc d’Arguin (Fondation Internationale du Banc d’Arguin, FIBA), played a key role in establishing a shared understanding of the benefits that MPAs bring to the fishing sector and the benefits trust funds bring to marine conservation. This required concerted lobbying in the co-ordination of those involved in country, in the European Union, and in the broader donor community. In Guinea-Bissau, another environmental NGO, the International Union for the Conservation of Nature (IUCN), also played an important role by laying the ground work for broader institutional change concerning conservation.

Devise targeted measures to address potential impacts on competitiveness and income distribution

The examples of France, Iceland and Switzerland illustrate the importance of minimising costs of reform on targeted sectors and stakeholders as a means to overcome potential opposition to reform. The cases show how the distribution of costs and benefits (real or perceived) can be fundamental in defining the ambition and pace of reforms, policy choice and design. Recycling the revenue from environmentally related taxes or putting into place transitional measures can help to minimise the cost to affected sectors. Other economic instruments can be used to address distributional concerns, such as resource rent taxes, to more widely share the benefits of harvesting common property resources.

In the case of France, as Europe’s leading agricultural producer, limiting the potential costs to the agricultural sector of policies to reduce pesticide use has been a prerequisite to advancing reform. Recycling the revenue from the tax on diffuse pollution to mainly benefit farmers helped to gain the political acceptability of the tax and subsequent increases in the tax rate and the expansion of the tax-base. This revenue recycling mechanism was also a critical factor that supported maintaining the ambitious reduction targets under the Ecophyto Plan II, when the results of the previous plan, Ecophyto I, fell well short of targets to reduce pesticide use by 50%. Moreover, the removal of the reduced value-added tax (VAT) rate on pesticides did not affect production costs for most farmers, as they benefit from a simplified VAT scheme. This, undoubtedly, contributed to the acceptance of the removal of this environmentally-harmful subsidy, one of the very few recommendations from the 2011 national study on public subsidies harmful to biodiversity (Sainteny, 2011) that was successfully implemented.

Also in the case of France, concerns about potential negative impacts on competitiveness on the agricultural sector have been sufficient to limit the increases in the rate of the tax on diffuse pollution to modest levels, far below those that could have a strong incentive impact on pesticide use. Although, recognising that moderate pesticide use reduction need not be at odds with the competitivity of agricultural firms may provide a powerful means to overcome this persistent barrier to more ambitious action. As argued by Potier (2014), the experience of farmers already engaged in reducing pesticide use – from the pioneers of sustainable agriculture to the champions of precision agriculture – demonstrates that such systems can deliver economic, environmental and social benefits, without reducing agricultural production.

In Iceland, the reform has been a clear success measured in economic efficiency and as a way of drastically reducing fishing effort to safeguard the sustainability of the fish stocks. However, there were distinct winners and losers which led to subsequent reforms to meet certain economic and political demands. Introducing a property rights based system, such as ITQs, leads to changes that benefit some more than others, especially when fishing rights are freely transferable. Much of the discontent over the years following the reform has been due to the initial free allocation of the quotas to existing fishers based on their recent catch levels at the time. This approach of initially grandfathering fishing rights is very common for property rights based systems because it is often the easiest approach from a political perspective and it can have positive efficiency advantages compared to some other means of distribution. However, even more than three decades later, this is considered by some people in and outside of the industry to have been an unjust way of disbursing rights to harvest a commonly owned resource. People who live in fishing regions where quotas are sold or leased are often left with few other employment opportunities and can experience economic and social hardships. Although the quota owners receive payment for their quotas, others that depended on the fishing activity for their livelihood, directly or indirectly, do not receive such payments.

The resource rent tax introduced in 2012 sought to remedy some of the distributional issues related to the initial free allocation of quotas. The aim is to ensure that the general public in Iceland receives benefits from the commonly owned fish resources. Although it is undeniable that the Icelandic economy has benefitted greatly from a more efficient fishing industry, the ITQ system generates resource rents to companies in the industry and claims have been made that these resource rents should accrue to a greater extent to the general public. While the resource rent tax has provided increased revenues to the state, there is still discussion about the appropriate level of the tax and whether other methods to collect the resource rent, such as auctioning, would be preferred.

For Switzerland, advancing reforms to better target agricultural support required devising politically and socially acceptable compromises in the reform package. The Agricultural Policy 2014-17 (AP 2014-17) included an important compromise to balance interests, which facilitated its approval by Parliament. This consisted of maintaining the overall level of budgetary support for agriculture (in fact, the overall level increased slightly) while re-distributing that support across the new categories of payments (including biodiversity payments). Through this major compromise, the agricultural sector as a whole receives slightly increased budgetary payments over the 2014-17 period, while the level of direct payments either increases or decreases for various groups of farmers. For example, alpine farmers in particular benefitted from more payments for extensive production and biodiversity payments under the new system. At the same time, farmers no longer receive payments per head of cattle, affecting in particular, those with intensive cattle operations in the lowland region of the country.

In addition, transition payments were included in the reform package to minimise negative impacts on farmers. The most contentious and hotly debated change was the removal of payments per head of cattle. These payments constituted an important fraction of total payments for certain farmers and it was this element of the reform where the ultimate “losers” were clearly identifiable. Transition payments were provided to help offset expected income losses to farmers no longer receiving the payments per head of cattle. In addition, the animal related payments under the previous system were largely shifted to the category of food security payments.

Use a robust evidence base to build support for reform and provide resistance to pressure from vested interests

A robust scientific and economic evidence base can be a valuable tool in the arsenal of governments seeking to advance policy reforms. Such an evidence base can help to clearly identify the benefits and beneficiaries of reform, make the case for change and provide means to resist pressure from vested interests. In the case of Switzerland, environmental NGOs played a key role as part of their lobbying efforts to disseminate information about expected benefits of reforms to specialised agricultural groups, such as alpine farmers, which benefitted from more payments for extensive production and biodiversity payments under the new system. This helped to encouraged their engagement to support the reform process.

In the case of France, a robust evidence base supported by scientific research has been critical for the government to stand firm against lobbying pressure in the context of the recent introduction of the pesticides savings certificates. Ensuring a robust, scientifically supported link between the approved actions under these newly established pesticide savings certificates and actual reductions in pesticide use is essential for the success of the scheme. Yet, there has been limited economic evaluation of the costs of negative externalities from pesticide use in France. Incomplete information on total environmental and health costs to society of pesticide use impedes a more thorough cost-benefit analysis of pesticide use and better understanding of the distribution of costs and benefits to society. Such information could reinforce support by both policy makers and the public for reform. At the same time, incomplete information should not be used as a reason to delay action.

Encourage stakeholder engagement to build broad and durable support for reform

The cases of France, Switzerland and Iceland reveal distinct approaches to stakeholder engagement, with differing outcomes. In France and Switzerland stakeholder engagement has been very broad and intensive. This has meant that reforms have been incremental, proceeding at a slow pace, but generally moving in a positive direction. Also, in France, this approach to stakeholder engagement has been credited with helping to set ambitious targets in terms of pesticide use reduction. In contrast, limited stakeholder engagement likely contributed to the speedy adoption of more drastic reforms to establish the comprehensive ITQ system in Iceland.

In France, broad stakeholder engagement inspired by the “Grenelle model” along with the close co-operation between the Ministries of Environment and Agriculture, has been key to overcoming resistance of vested interest to reforms. Greater representativeness of stakeholders has had a positive influence on policy reforms in this case, as it has encouraged the engagement of a number of smaller, innovative pioneers who are helping to advance the agro-ecology agenda. Although this time-consuming and resource-intensive consultation process means that progress has been rather slow and modest, it is generally moving in a positive direction. However, the Grenelle approach of broad engagement does not eliminate the diversity of opinions and interests. While it is unlikely that French would have adopted such ambitious targets to reduce pesticide use in the absence of Grenelle, achieving these objectives still requires steady political will.

For Switzerland, the unique political system, with elements of direct democracy, means that reforms involve many stakeholders and extensive consultations. As a result, agreeing policy reforms and implementing them is a lengthy, but well-structured process. In the case of the reform of the direct payments system, broad stakeholder consultation helped to involve not only major lobbying groups including environmental NGOs, economics institutions, like economiesuisse, and the Farmers’ Union, but also engaged smaller agricultural groups, including organic farmers associations and farmers located in alpine areas, who were well-positioned to benefit from the reform. Similar to the case of France, this greater representativeness allowed for the inclusion of smaller groups, which could better express the heterogeneous interests of the agricultural sector. At the same time, there is a strong public consensus about the multi-functional purpose of agriculture in the adoption of Article 104, which was adopted by popular vote.

In Iceland, the major reform to establish the ITQ system was led mainly by government authorities, including scientists. Some industry stakeholders, such as fishers and people whose livelihood depended to a great extent on the fishing (such as people in the processing industry and people living in rural areas dependent on fishing) were not explicitly engaged in the reform and the implementation of the ITQ system. Limited initial stakeholder engagement may have led to piecemeal amendments to the system over time to respond to specific stakeholder demands. For example, regional quotas were put in place to support communities where fishing is an economic mainstay, with variable results. Exemptions from the ITQ system were afforded for small vessels with the aim to protect rural employment, but undermined the sustainability of the system. In addition, a coastal fisheries system was devised to accommodate new entrants with small vessels, but the efficiency of the system is questionable.

If these stakeholders had been engaged in the reform process early on, a different system may have emerged than the ITQ system that was eventually adopted. At the same time, it may be argued that such sweeping reforms would have been difficult to implement as quickly, if the process had included the participation of all the different stakeholders. Including every possible stakeholder group would have taken time and resulted in a political debate at every step of the process. Generally, stakeholder engagement can help secure the broad support and durability of reforms. Where governments need to act quickly to avert a crisis, a balance needs to be struck to provide opportunities for stakeholder engagement, without unduly delaying the reform process.

Consolidate gains to ensure that reforms are sustained over time

The cases reviewed in this report also attest to the importance of ensuring that reforms are sustained over time, a theme raised in the broader political economy literature. Vested interests, for example, do not simply disintegrate once a policy reform has been enacted. As the influence of political parties changes as a result of election cycles, and new coalitions emerge, political priorities can shift. Similarly, when there is high turn-over of leadership and staff in key institutions, a void may be created when champions or experts move on, resulting in existing policies becoming vulnerable to back-tracking. These challenges have arisen in the case study on Mauritania and Guinea-Bissau where resources are scarce and financing dedicated to the endowment competes with short term sectoral priorities. Continuous training of staff, awareness raising, provision of evidence-based results, and active lobbying can help to maintain successful reforms over time. Furthermore, agreements with a firm legal basis will be more enduring that those based on an informal understanding, which can be contested and altered once leadership changes.

In the case of Mauritania, wavering political support threatens the long-term stability of the conservation trust fund. Early momentum to establish financing arrangements for conservation trust funds has dissipated somewhat, as government priorities have shifted away from conservation and competition for scarce financial resources for short term sectorial priorities threatens the continued capitalisation of the funds. The opportunity cost of allocating finance to the conservation trust funds (rather than to more immediate needs) is felt acutely by the government, while the benefits of such arrangements (by promoting more sustainable fisheries) accrue to a wide range of actors (fishers, tourists) over a longer period of time and in a more diffuse way. Further, the recent context of low interest rates challenges the rationale for placing funds in an endowment.

The transitory nature of the arrangement could also jeopardise long term commitments, as Fisheries Partnership Agreements (FPAs) and protocols are renegotiated on a regular basis as are government budgets. Paradoxically, such uncertainties in the continued commitment of governments are one of the main justifications for establishing conservation trust funds in the first place. One option to address this is would be for the EU to directly finance the trust funds to ensure its own goals (and financial management rules) under the Common Fisheries Policy are met. Moreover, to maintain local support, conservation trust funds must also rapidly demonstrate their potential as actual grant-makers. Associating revolving and sinking funds to endowments would help mitigate this perceived “taking-away” of scarce and valuable resources from short-term needs.

Securing progress towards conservation goals requires funding mechanisms that are financially and institutionally sustainable, such as conservation trust funds. However, a strong and stable institutional framework underpinning the financial arrangement that goes beyond a handshake agreement is equally important. In Mauritania, the capitalisation of the endowment was based on an informal understanding and quickly challenged after leadership changes in key institutions putting at risk the partnership between the trust fund and the protected area authorities. A possible solution could be to increase the independence of the trust fund making it an autonomous player, which can defend its role and interests, and establish a national constituency.

In the case of Switzerland, not long after the reform of the AP 2014-17 was voted by Parliament, the Farmers’ Union launched a call for a popular initiative proposing a change to Article 104 of the Federal Constitution, which sets out the multifunctional purpose of agriculture in Switzerland. The popular initiative seeks to place greater emphasis on goal of food security, which is seen as a step backwards for those who supported the AP 2014-17. Further, while the AP 2014-17 represents an important step forward, Swiss agricultural subsidies remain relatively high compared to other OECD countries. The direct payments system still consists of a number of subsidies that have unclear, or possibly contradictory, impacts on environmental objectives. To continue to pursue biodiversity objectives and put Swiss agriculture on a more sustainable footing, the system will need to continue to evolve with better targeted direct payments. The outcome of the pending popular initiative on food security is yet to be seen.

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Notes

← 1. The 4th Global Biodiversity Outlook draws on various sources of information to provide a mid-term assessment of progress towards the implementation of the Strategic Plan for Biodiversity.

← 2. For example, Article 8.32 of the Agenda 21 programme adopted at the Rio Conference in 1992 states that the signatory countries shall “remove or reduce those subsidies that do not conform with sustainable development objectives”, as well as “reform or recast existing structures of economic and fiscal incentives to meet environment and development objectives”. The idea of “Restructuring taxation and phasing out harmful subsidies, where they exist” is also found in the Plan of Implementation of the World Summit on Sustainable Development, adopted at Johannesburg in 2002.

← 3. Aichi Target 3 states: “By 2020, at the latest, incentives, including subsidies, harmful to biodiversity are eliminated, phased out or reformed in order to minimise or avoid negative impacts, and positive incentives for the conservation and sustainable use of biodiversity are developed and applied, consistent and in harmony with the Convention and other relevant international obligations, taking into account national socio economic conditions.”

← 4. WTO “Green Box” criteria include those payments that are allowed without limit. While the process of market-oriented reforms had generally been advancing in a positive direction, Swiss agricultural support remained almost three times the OECD average (WTO, 2013).